They Saw The Trouble Coming -- And Some See More Ahead

Kiplinger’s takes a look this week at nine people who “called it right” in predicting the credit crisis and market collapse, and asks what they see coming for the year ahead. Some — like Jeremy Grantham, Robert Rodriguez, and Nouriel Roubini — are people whose opinions we’ve detailed in past posts, but here’s a look at the predictions (most of which have to do with the economy, not the stock market) for some of the others:

  • Peter Schiff, president Euro Pacific Capital: Dollar will keep falling, leading to a resurgence in commodities. “That will pierce the bubble in the bond market, causing interest rates to go up. So we’re going to be in a depressionary environment, but with rising prices and rising interest rates. Our economy will be a mess for years and years to come.”
  • Meredith Whitney, Oppenheimer & Co. analyst: “We believe we are now entering a new era in the financial landscape that will be characterized by expanded forced consumer deleveraging, with a pronounced downshift in consumer spending ” Regarding credit card industry, she believes well over $2 trillion of lines of credit will be pulled over next 18 month.
  • David Tice, Federated Investors’ chief equity strategist for bear markets: Sees continued dollar decline, and “very possible” inflation increase. “The S&P 500 index could easily fall to 450 or so. This will be a longer-term decline — you’ll see fits and starts and significant rallies, which will be selling opportunities. But it’s likely going to take four to five to ten years. Investors should be selling equities and conserving cash.” Says gold represents “phenomenal” opportunity right now.
  • Robert Shiller, Yale University professor: Says current situation has many similarities to Great Depression. “The Great Depression was a self-fulfilling prophecy — there was no reason for it other than that people were getting worried, and right now everyone’s worried about what bad times we’re in. We do have better monetary policy and a government that’s clearer on its fiscal policy, so I’m hopeful. Ben Bernanke claims he can stop deflation. Bernanke will be tested.”
  • Mark Kiesel, PIMCO portfolio manager: “The consumer went through a 20-year leveraging-up period. Now we’re going through the Great Unwind, and that takes time.” Recession will probably last until the second half of 2009, “but even as we come out, it won’t feel good. This will be an extended period of subpar growth. Credit is the blood that flows through the patient, and the patient has had a heart attack.” Too soon to buy stocks and too soon to buy a house, he says. “It won’t be time to buy until the credit markets have healed.”